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The Ohio Estate Tax is Coming to an End! | Tax Tip of the Week | No. 103 July 27, 2011

Posted by bradstreetblogger in : Taxes, Taxes , 1 comment so far

Ohio Estate Tax Update

The recently enacted 2012-2013 budget that Gov. Kasich signed into law includes a provision that eliminates the Ohio estate tax.  Before this repeal, Ohio taxed anyone who died with assets above $338,333 at a tax rate of up to 7%.  This was the lowest exemption amount of any state in the United States.

Unfortunately, the repeal is not immediate.  Anyone who dies, on or after January 1, 2013, will not face the burden of the Ohio estate tax.  Until January 1, 2013, however, the current estate tax law will continue to apply.  This means that if someone dies before that date, their estate is still subject to the current tax law.

The repeal of the Ohio estate tax is great news.  It affected a large number of Ohioans, many of whom had accumulated only modest wealth.  It particularly helps Ohioans who many times are asset-rich but cash poor—such as farm families.  Once the repeal goes into effect, not only will you not owe any estate tax, you will not need to hire a professional to prepare and file the tax returns.

It is important to remember that even though this is a “permanent” repeal of the Ohio estate tax, all that really means is that it does not automatically come back at some point in the future.  What one administration grants, another can take away in the future.  There is nothing that prohibits a future administration from reenacting the Ohio estate tax.

Even though the Ohio estate tax is being repealed, combined with the increase of the Federal estate tax exemption, this does not mean you should ignore your estate planning needs.  Estate planning is not just about money and taxes.  We highly recommend you consult with an estate attorney to reevaluate your estate planning needs.  We can refer you to a competent estate attorney if you need an introduction.

Editor’s Note:  This TTW relies heavily upon an update written by:
O’Diam & Stecker Law Group, Inc.

75 Harbert Dr.

Dayton, OH  45440

(937) 458-0574

 

As always, give us a call if you have any questions.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

 

IRA Terms You Should Know | Tax Tip of the Week | No. 102 July 20, 2011

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Three Terms Regarding Roth Conversions

There were a lot of discussions this recent tax season regarding the tax law changes on Roth conversions.  Those conversations will likely continue this year, as some changes to your new Roth can be made through October 2011.

Here are three terms you should know:

Conversion:  A conversion is the act of moving your retirement account assets from one type of IRA to another.

You can convert all or part of a traditional IRA to a Roth IRA.  Just remember the amount you convert is taxable, assuming you have no basis in your traditional IRA.

Note:  Only conversions made in 2010 allowed you the option to pay one half the tax liability in 2011 and the other half in 2012.  Any conversions made in 2011, and the subsequent taxes, will need to be paid on your 2011 tax return.

Recharacterization:  After making a Roth conversion, you can choose to transfer the assets back to your traditional IRA.  Recharacterizing cancels the initial conversion as if it never happened.  This could be good tax planning if the value of the assets decline after you converted.  While the loss is not deductible, you’ll avoid paying tax on the full amount of the initial conversion.

For a 2010 conversion, you have until October 17, 2011 to do a recharacterization.

Reconversion:  A reconversion is what happens after you convert a traditional IRA to a Roth, later recharacterize, and then decide to make another conversion.

A waiting period applies that limits you to one reconversion per year.

Give us a call to see if any of these tax planning tips could help you.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

 

Ohio Closes Seven Tax Centers | Tax Tip of the Week | No. 101 July 13, 2011

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New Budget Plan Reduces Government Spending

Dealing with the Ohio Department of Taxation (ODT) just became a little more difficult.  ODT has announced that June 30, 2011 was the last day that Service Centers in Akron, Cincinnati, Cleveland, Dayton, Toledo, Youngstown, and Zanesville would be open.

This move is expected to save more than $7 million/year.  A union leader for the laid off tax workers argued that the closings would hurt 42,000 taxpayers that visit the offices each year.  This move was one among many that were recently passed by Gov. Kasich’s new budget plan to reduce government spending.

Only three walk-in centers remain:

If you need help with your Ohio taxes, you will now need to travel to Columbus, visit ODT’s website, or call the automated telephone hotline (800) 282-1780 (for personal income tax issues).

Or, you can always call us if you have any questions.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Insulate Your Children From Tax Issues | Tax Tip of the Week | No. 100 July 6, 2011

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Ten Steps to Make Your Kid a Millionaire

This week we are going to paraphrase an excellent article that appeared in the June 27, 2011 issue of Forbes (author: William Baldwin).

The article outlines ten steps you can make which will make your children insulated from looming entitlement reductions and tax increases.

1. Don’t Overeducate: The master’s degree your son or daughter wants may be a bad investment.

2. Find a Cheap B.A.: In reality, graduates do well in life because of talent and ambition, not because of an expensive degree.

3. Fund a Roth: Tell your kids you will match every dollar they earn, provided that your dollars go into a Roth retirement account that they will not touch for 50 years.

4. Avoid Credit Card Debt: An average credit card balance of $8,000 at 15% interest rate will result in $60,000 finance charges over the lifetime of the debt.

5. Shop for a 529 Plan: Start saving for college expenses when your children are young.

6. Give Away Grandpa’s IRA: If, for example, your parent names you beneficiary of their IRA upon their death, you have the option to “disclaim” the inheritance.  By so doing, you can then name the next generation as beneficiaries of the IRA and therefore extend the tax-deferred accumulation of earnings.

7. Start Them Young: Children should learn about budgets – and limits – at an early age.

8. Give Stock: This strategy works well for children over age 24 (due to Kiddie Tax rules).  The idea is to give appreciated stock up to $13,000 to allow them to make a major purchase.

9. Put Your Kids In a House: The gift of a down payment on your kid’s first house can create a benefit of compounding over decades.

10. Hire Your Offspring: If you own a business, putting your children on payroll offers numerous tax saving opportunities.

To read the full article, click here.

Give us a call to discuss steps you can take based upon your situation and goals.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.